Subject: Other
Bank overdraft is an amount overdrawn from the bank. It is a loan facility provided by the bank to its customers by which they are entitled to draw more amount than what is in their account. On the amount of overdraft, the bank also charges some interest by debiting the customers’ account in the bank. Bank overdraft is a situation of negative bank balance, that is, debit balance of pass book.
The following procedures are followed while preparing the bank reconciliation statement:
If the causes of disagreement between the cash book and pass book balances are given, the bank reconciliation statement can be prepared either by taking the balance of cash book or pass book. The bank reconciliation statement can be prepared by using either of the following bases:
In this case, it is to be seen whether a particular item increases or decreases the favourable balance of the pass book. Those items which decrease the pass book balance are to be subtracted. The specimen of a bank reconciliation statement are as follows:
Bank Reconciliation Statement
As on ……………….
Particulars | Amount Rs. | Amount Rs. |
Bank balance as per cash book | *** | |
Add: | ||
Cheque issued but not presented for payment | *** | |
Interest allowed or credited by bank but not entered in cash book | *** | |
Cheques deposited or paid into the bank but not recorded in cash book | *** | |
Interest, dividend and other incomes collected by the bank but not entered in cash book | *** | |
Bills receivable directly collected by the bank | *** | |
Amount deposited by a customer directly into the bank | *** | |
Cheque issued but returned dishonoured | *** | |
Any amount wrongly credited by the bank | *** | *** |
*** | ||
Less: | ||
Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
Bank charges, commission and interest on overdraft charged by the bank | *** | |
Insurance premium and other payments paid directly by bank understanding instructions but not entered in cash book | *** | |
Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
Dishonor of bills discounted by the bank but not recorded in cash book | *** | |
Any item wrongly debited by bank | *** | *** |
Balance as per pass book | *** |
In such a case, overdraft balance can be shown in the brackets for indicating, it is a ‘minus item’ and all items should be adjusted in the same way as presented below:
Bank Reconciliation Statement
As on ……………….
Particulars | Amount Rs. | Amount Rs. |
Bank overdraft as per cash book | (***) | |
Add: | ||
Cheque issued but not presented for payment | *** | |
Interest allowed or credited by bank but not entered in cash book | *** | |
Cheques deposited or paid into the bank but not recorded in cash book | *** | |
Interest, dividend and other incomes collected by the bank but not entered in cash book | *** | |
Bills receivable directly collected by the bank | *** | |
Amount deposited by a customer directly into the bank | *** | |
Cheque issued but returned dishonoured | *** | |
Any amount wrongly credited by the bank | *** | *** |
*** | ||
Less: | ||
Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
Bank charges, commission and interest on overdraft charged by the bank | *** | |
Insurance premium and other payments paid directly by bank understanding instructions but not entered in cash book | *** | |
Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
Dishonor of bills discounted by the bank but not recorded in cash book | *** | |
Any item wrongly debited by bank | *** | *** |
Bank overdraft as per pass book | *** |
If the overdraft shown by the cash book is used with the (+) sign, the items which cause difference will be adjusted the other way, viz, the items which previously added will be subtracted and vice versa.
Bank Reconciliation Statement
As on ……….
Particulars | Amount Rs. | Amount Rs. |
Bank overdraft as per cash book | *** | |
Add: | ||
Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
Bank charges, commission and interest on overdraft charged by the bank | *** | |
Insurance premium and other payments paid directly by bank understanding instructions but not entered in cash book | *** | |
Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
Dishonor of bills discounted by the bank but not recorded in cash book | *** | |
Any item wrongly debited by bank | *** | *** |
*** | ||
Less: | ||
Cheque issued but not presented for payment | *** | |
Interest allowed or credited by bank but not entered in cash book | *** | |
Cheques deposited or paid into the bank but not recorded in cash book | *** | |
Interest, dividend and other incomes collected by the bank but not entered in cash book | *** | |
Bills receivable directly collected by the bank | *** | |
Amount deposited by a customer directly into the bank | *** | |
Cheque issued but returned dishonoured | *** | |
Any amount wrongly credited by the bank | *** | *** |
Bank overdraft as per pass book | *** |
If credit balance of the pass book is to be taken as a base, the effect of each item which causes the difference in the cash book balance is to be found out. Besides, it is to be seen whether a particular item increases or decreases the cash book balance.
After finding out the effect of each item, those items which increase the cash book balance are to be added and the items which decrease the cash book balance are to be subtracted. The specimen of the bank reconciliation is to be prepared on the basis of bank balance as per pass book is as follows:
Bank Reconciliation Statement
As on ………
Particulars | Amount Rs. | Amount Rs. |
Bank Balance as per pass book | *** | |
Add: | ||
Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
Bank charges, commission, bank overdraft so then charges deposited by the bank but not entered in cash book | *** | |
Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
Payment made by the bank directly on standing instruction | *** | |
Discounted bills dishonoured but not recorded in cash book | *** | |
Any amount wrongly debited by the bank | *** | *** |
*** | ||
Less: | ||
Cheques issued but not presented for payment | *** | |
Interest allowed and credited by the bank but not entered in cash book | *** | |
Cheques deposited and paid into the bank but not recorded in the cash book | *** | |
Interest, dividend and other incomes collected by the bank but not entered in the cash book | *** | |
Bills receivable directly collected by the bank | *** | |
Amount deposited by a customer directly into the bank | *** | |
Cheque issued but returned dishonoured | *** | |
Any amount wrongly credited by the bank | *** | *** |
Balance as per cash book | *** |
When the bank pass book shows the debit balance (i.e. overdraft) that could be shown in the brackets for indicating (-) minus item and all the adjustments should be adjusted the same way as above. The specimen of the bank reconciliation statement to be prepared on the basis of overdraft balance as per pass book is as follows:
Bank Reconciliation Statement
As on ………
Particulars | Amount Rs. | Amount Rs. |
Bank overdraft as per pass book | (***) | |
Add: | ||
Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
Bank charges, commission, bank overdraft so then charges deposited by the bank but not entered in cash book | *** | |
Payment made by the bank directly on standing instruction | *** | |
Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
Dishonor of bills discounted by the bank but not recorded in cash book | *** | |
Any amount wrongly debited by bank | *** | *** |
*** | ||
Less: | ||
Cheque issued but not presented for payment | *** | |
Interest allowed or credited by bank but not entered in cash book | *** | |
Cheques deposited or paid into the bank but not recorded in cash book | *** | |
Interest, dividend and other incomes collected by the bank but not entered in cash book | *** | |
Bills receivable directly collected by the bank | *** | |
Amount deposited by a customer directly into the bank | *** | |
Cheque issued but returned dishonoured | *** | |
Any amount wrongly credited by the bank | *** | *** |
Bank overdraft as per cash book | *** |
In this case also, if we don’t want to show the overdraft amount indicating the minus sign(-), the items added above are to be deducted and deducted item are to be added:
Bank Reconciliation Statement
As on ……………….
Particulars | Amount Rs. | Amount Rs. |
Bank overdraft as per pass book | *** | |
Add: | ||
Cheque issued but not presented for payment | *** | |
Interest allowed or credited by bank but not entered in cash book | *** | |
Cheques deposited or paid into the bank but not recorded in cash book | *** | |
Interest, dividend and other incomes collected by the bank but not entered in cash book | *** | |
Bills receivable directly collected by the bank | *** | |
Amount deposited by a customer directly into the bank | *** | |
Cheque issued but returned dishonoured | *** | |
Any amount wrongly credited by the bank | *** | *** |
*** | ||
Less: | ||
Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
Bank charges, commission, bank overdraft so then charges deposited by the bank but not entered in cash book | *** | |
Payment made by the bank directly on standing instruction | *** | |
Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
Dishonor of bills discounted by the bank but not recorded in cash book | *** | |
Any amount wrongly debited by bank | *** | *** |
Bank overdraft as per cash book | *** |
From the following particulars prepare a bank reconciliation statement:
Required: Bank Reconciliation Statement
Solution:
Bank Reconciliation Statement
Particulars | Amount (in Rs.) | |
Details | Total | |
Bank balance as per cash book | 8,000 | |
Add: | ||
Cheques issued but not presented for payment | 5,000 | |
Amount wrongly credited in the pass book | 900 | |
Amount of interest collected and credited by pass book only | 100 | 6,000 |
Less: | 14,000 | |
Cheques sent for collection but not yet credited by the bank | 25,000 | 25,000 |
Overdraft as per pass book | 11,000 |
Following information are given:
Required: Bank Reconciliation Statement
Solution:
Bank Reconciliation Statement | |
As on 30th Falgun, 2072 |
Particulars | Amount (in Rs.) | |
Details | Total | |
Balance as per pass book | 20,000 | |
Add: | ||
Cheque deposited into the bank but not yet credited by the bank | 10,000 | |
Bank charge debited in the pass book only | 1,000 | |
Insurance premium paid by the bank but not shown in the cash book | 1,500 | |
A cheque debited in the cash book but not yet sent for collection | 3,000 | 15,500 |
Less: | ||
Cheque issued but not presented for payment | 2,000 | |
Amount directly deposited by the customer into the bank | 5,000 | (7,000) |
Balance as per cash book | 8,500 |
Following information are given:
Required: Bank Reconciliation Statement
Bank Reconciliation Statement
Particulars | Amount (in Rs.) | |
Details | Total | |
Bank overdraft as per pass book | (10,000) | |
Add: | ||
Cheque deposited into the bank but not collected by the bank | 3,000 | 3,000 |
(7,000) | ||
Less: | ||
A cheque deposited into the bank but not recorded in the cash book | 1,000 | |
Bank charges recorded twice in the cash book | 100 | |
Bills collected by the bank but not recorded in the cash book | 4,000 | (5,100) |
Overdraft as per cash book | (12,100) |
Cash book showed an overdraft balance of Rs.5,900 on 30th Ashadh, 2070.
Required: Bank Reconciliation Statement
Bank Reconciliation Statement | |
As on 30th Ashadh, 2070 |
Particulars | Amount (in Rs.) | |
Details | Total | |
Overdraft as per pass book | (9,000) | |
Add: | ||
Cheques issued but not yet presented for payment | 7,000 | 7,000 |
Less: | (2,000) | |
Cheques deposited into the bank but not yet collected by the bank | 470 | |
Interest on overdraft debited in the pass book only | 150 | |
Cheque debited in the cash book but not yet sent for collection | 135 | 755 |
Overdraft as per pass book | (1,245) |
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